Business insolvencies increase by 6%

Latest figures from the Insolvency Service have shown that the number of registered business insolvencies in England and Wales in January 2025 was 1,971, 6% higher than in December 2024 (1,852) and 11% higher than the same month in the previous year (1,780).

The business insolvencies consisted of 269 compulsory liquidations, 1,546 creditors’ voluntary liquidations (CVLs), 142 administrations and 14 company voluntary arrangements (CVAs). There were no receivership appointments. 

Compulsory liquidations were 5% lower than in December 2024 and 5% lower than in January 2024.

CVLs accounted for 78% of all business insolvencies. The number of CVLs increased by 9% from December 2024 and was 14% higher compared to the same month last year (January 2024) after seasonal adjustment.

Administrations were 10% higher than in December 2024 and 9% higher than in January 2024 after seasonal adjustment whilst CVAs were 13% lower in January 2025 than January 2024 and 18% lower than in December 2024. 

Tim Cooper, President of R3, the UK’s insolvency and restructuring trade body, and a Partner at Addleshaw Goddard LLP, said “The monthly and yearly rise in corporate insolvencies is down to an increase in the number of Creditors’ Voluntary Liquidations and Administrations. That would suggest that directors may be choosing to close down their firms after years of challenging trading conditions and ahead of the increase in the National Minium Wage and Employers’ National Insurance Contributions in April, and this has pushed corporate insolvency levels to the highest we’ve seen in January in more than five years.

“However, there is some positive news in the form of the increase in Administration numbers – to a figure that’s higher than this time last month and this time last year – as it suggests that there are more companies that have the potential to be rescued via a sale out of Administration.

“Creditor pressures and ongoing cost issues are continuing to drive corporate insolvencies. A long period of rising expenses coupled with consumers’ reluctance to spend is continuing to take a toll on businesses, and creditors have now largely abandoned the benign attitude they had in the aftermath of the pandemic as they attempt to manage their own debts. We’ve also seen HMRC return to its pre-pandemic approach of pursuing money it’s owed after years of taking a more supportive stance during and after the COVID era.

“On top of this, firms across a number of sectors haven’t had the results from the Golden Quarter they were hoping for. Retailers have seen an increase in sales but this has largely been driven by discounts and deals, and the construction sector has been affected by the weather, client caution around commissioning projects and ongoing rises in costs. The hospitality sector has also failed to see the rise in revenues it was hoping for at Christmas, although pubs and bars had a better start to the year than expected after many adapted their offerings to accommodate ‘Dry’ January.

“Looking at the wider economy, the projected cut in growth has had an impact on business confidence and led to many directors and management teams becoming unsure about investment or business growth this year, as well as reducing firms’ willingness to invest in growing their workforces ahead of the increase in National Minimum Wage and Employers’ National Insurance Contributions in April. However, this has also led to the Monetary Policy Committee cutting the base rate of interest, which should improve access to rescue finance.

“Against this backdrop, I would expect to see an increase in demand for restructuring advice and support, as firms consider their options ahead of the end of the financial year, and with cost and creditor pressures unlikely to ease in the short-term.”

Giuseppe Parla, Business Recovery Director at Menzies said “While December figures painted a picture of economic stability, January delivered a new wave of corporate insolvencies as British business continues to be hit hard. Despite a recession ‘near-miss’, many businesses are cutting their losses with prices rising 2.5% in the 12 months preceding December, alongside a heavier tax burden. And for businesses looking to cover costs through an exit, previous increases to business asset disposal relief (BADR) and capital gains tax (CGT) hikes will mean reduced asset values and higher tax liabilities – meaning lower returns and less disposable funds.

“Cuts to the bank base rate however may provide a lifeline for many businesses calling out for affordable borrowing. But for many, this could be the final straw in the pursuit of business continuity. All eyes now turn to the Treasury: will the Spring Forecast deliver further hope for growth or a return to doom and gloom for British business.”

Daniel Staunton, Senior Associate in the Restructuring & Insolvency team at Kingsley Napley LLP, said “Today’s monthly insolvency statistics for January 2025 show that there were 1,971 registered company insolvencies, 6% higher than December 2024 and 11% higher than January 2024. Figures are down from the record 30 year high in 2023.

“January 2025 saw: 269 compulsory liquidations, 1,546 CVLs, 142 administrations and 14 CVAs. CVLs and administration were both higher than last month but compulsory liquidations were lower. CVLs accounted for 78% of all company insolvencies.

“The stats this month are consistent with the figures published throughout 2024 and show a steady increase in the number of insolvencies but with no sharp decline or increase in any one insolvency process. Compulsory liquidations were down but only by 5% from the previous month, for example. The Bank of England acted recently to cut interest rates (again) to curb rising inflation and there remains a smorgasbord of risk factors that could see tip the scales to result in sharp spikes in the total number of insolvencies in the coming months if these quantitative easing steps do not kick in as soon as the government hopes. It comes as no surprise that the worst hit sectors continue to be construction, retail and food and beverage companies which trend I expect to continue.”